UK aerospace engineering business Senior (SNR) is being pursued by private equity buyers but has so far rejected all offers.
Senior confirmed on 28 May that private equity firm Lone Star made an offer to buy the business at 176p per share on 20 May. The offer valued Senior at about £730 million, 72% above the price immediately before the offer was made. The offer would have been worth approximately £940 million on an enterprise value basis, which includes Senior’s rough £206 million of net debt.
THIRD STRIKE BUT NOT OUT?
It was revealed that this was the third attempt by Lone Star to strike an agreement, but all three have been shunned. After discussion with its advisers, Senior’s board concluded that the offer ‘fundamentally undervalued the company and its future position.’
Lone Star is considering its position and is required to either announce a firm offer or walk away no later than 25 June.
Senior shares jumped 35% on 28 May to 159p, just 10% below the offer price, but investors appear confident that a deal is there to be struck. The stock reversed 6% or so on 1 June to 150p, but that is still 50% above the pre-talks level.
‘UNINSPIRING’ FINANCIAL PERFORMANCE
Senior designs and manufactures high-technology components and systems for the original equipment manufacturers in the worldwide aerospace, defence, land vehicle, power and energy markets. Yet these end markets have been volatile for some years, leading to what analysts at Berenberg called an ‘uninspiring’ financial performance.
‘Even before the impact of Covid-19, Senior had suffered from the Boeing 737 MAX grounding and weak industrial end-markets before that,’ said Berenberg.
Lone Star’s rationale seems to be pitched on the idea that it could accelerate Senior’s financial recovery. This may include more aggressive cost cutting in order to accelerate and exceed the current margin recovery profile, but it may also include selling off parts of the business.
According to Berenberg, Senior put its aerostructures unit (42% group revenues in 2019) up for sale at the end of 2019, but pulled the sale in April 2020 despite receiving strong interest.
